The Return Numbers You Should Be Caring About

I was reading a recent article that said people who look at their portfolio less often have much higher confidence in the stock market. It stated that it was partially due to rolling returns. It may sound confusing, but here is an example of the term "rolling returns": the five-year rolling return for 2015 covers Jan. 1, 2011, through Dec. 31, 2015. The five-year rolling return for 2016 is the average annual return for 2012 through 2016.


I decided to look back over a 50 year period to see how many times the market (S&P 500) was down. Including dividends, I looked at one year returns, 5 year rolling returns, 10 year rolling returns, and 15 year rolling returns. Why does this matter? Rolling returns offer a more comprehensive look at growth and growth potential.


Spoiler Alert: if an investor had literally left their money in the market and didn't look at it in any 15 year period for the past 50 years...the lowest return would've been a positive 5.49%. Yes, positive. This is why we coach clients on their investing behavior. Over the past 50 years, an investor that has invested and left their money invested in any 15 year time frame has experienced growth 100% of the time.


The market data I used was sourced by Robert Schiller's data, Yahoo! Finance, and NYU's Stern Business School.


Here are the summaries:


One Year Return Takeaways:


Highest return year: 1995; 38.02%

Lowest return year: 2008; -37.22%

Times positive: 39 out of 50; 78% of the time

Times negative: 11 out of 50; 22% of the time


5 Year Rolling Return Takeaways:


Highest return: 1995-1999; 28.44%

Lowest return: 2000-2004; -0.75%

Times positive: 47 out of 50; 94% of the time

Times negative: 3 out of 50; 6% of the time


10 Year Rolling Return Takeaways:


Highest return: 1989-1998; 19.88%

Lowest return: 1999-2008; 0.61%

Times positive: 50 out of 50; 100% of the time

Times negative: 0 out of 50; 0% of the time


15 Year Rolling Return Takeaways:


Highest return: 1985-1999; 19.45%

Lowest return: 1960-1974; 5.49%

Times positive: 50 out of 50; 100% of the time

Times negative: 0 out of 50; 0% of the time


The bottom line: time in the market matters more than timing the market.




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